SPOTTLIGHT — Who will provide the most accurate home valuation — Zillow or a local agent?

May 1, 2017

By Toni Spott

Toni Spott

Estimates are estimates and price opinions are price opinions.

There seems to be a lot of confusion as to what the price of a property should be these days. Lately the topic has heated up with the emergence of websites like Zillow and others.

Zillow is an online real estate database company that sells its information to real estate agents and produces a forecast of a home’s value known as a Zestimate. (Trulia, a site similar to Zillow, recently purchased Zillow.)

Zillow’s data, according the company’s chief analytics officer Stan Humphries, is drawn from a number of sources including the U.S. Census, county records of sales, tax assessments, FEMA flood zone maps, Bureau of Labor Statistics Employment Cost Index, the Federal Housing Finance Agency Home Price Index, and more. But those sources don’t include information about the current condition of the home or recent upgrades.

Sellers who are thinking of putting their home on the market need advice about establishing the best asking price for their home. Often, as they contemplate price, they think about a price point that will provide what they need or want. They get advice from their friends and family, and of course, everyone feels it’s worth a whole lot!

Then they go online and up pops Zillow! Woo! It’s a big showy site with lots of numbers, statistics, maps, and photos of real estate agents, etc. They type in their address and up pops the Zestimate — this is what your house should sell for! But most of the time that price is over- or undervalued; it’s rarely spot on.

So that is where is where the confusion comes in. Most people accept the Zestimate as expert advice and run with it. Here is the issue with that — Zillow “only knows” numbers. Its database can’t see the smoke stains on the ceiling or hear the cars on the freeway. It can’t smell pet odors. It can’t see the updates or the paint and other finishes. It doesn’t know if there is a big fenced-in backyard or if there is an apartment building right next door.

Zillow and Trulia have never been in your home to see what shape it’s in or what you’ve done to it, be it good or bad. These content portals share basic data but they can’t give you insight and local knowledge like a real estate agent can. A real estate agent can provide information about the immediate neighborhood and actual street where your home is.

A local agent will provide you with accurate and timely information that will include current home sales in your direct neighborhood. They know how the local market is going and where it’s going next. They live and breathe home sales versus the online guestimates of the value of your home. A real estate agent has their finger on the pulse of the market because they tour homes on a weekly basis and know what’s going on locally. They know about that new shopping mall going in a mile away, they know about the factory is slated to be built down the street in the coming months — they know what’s going on in the here and now.

Ultimately, the market sets the price, not a website.

The best example of a good use of the Zestimate program is the CEO of Zillow. He put his home on the market for sale and received 60 percent of the Zestimate value. It clearly wasn’t worth what Zillow and the Zestimate said it was. He sold it at market value. Rather ironic.*

All agents use the MLS (Multiple Listing Service) to gain the latest statistics on the market, and then when listing a home, they meet with the owner and tour the home to note any improvements or defects that affect the value of the property, as well as the surrounding area.

The same system used to establish the value of a home is also used by buyers, if they are working with a buyer’s agent. Like the selling agent, they need to know the actual value of the home they are placing an offer on. However, they tend to use the online sites to get an idea of the supposed home value, which doesn’t work in their favor.

So like the seller, it is in a buyer’s best interest to contact a real estate agent.